EUR: NFP to determine how far EUR/USD needs to rally – ING
EUR/USD enjoyed a modest bounce yesterday after bond markets concluded that they had priced enough of a risk premium into French markets. The OAT-BUND sovereign spread narrowed back into levels seen a couple of weeks ago. Today's NFP will determine how far EUR/USD needs to rally, ING’s FX analyst Chris Turner notes.
Short-dated rate spreads have turned a little more EUR/USD supportive
“In reality, French risk had not hit the euro too much, and equally we do not see the need for EUR/USD to rally too far on news that Marine Le Pen is not seeking the ousting of President Emmanuel Macron. However, political uncertainty will be unwelcome and French growth will still disappoint.”
“On the eurozone calendar today is the final release of third quarter GDP, which surprised at 0.4% quarter-on-quarter. Market pricing has very much now shifted towards just a 25bp rate cut from the European Central Bank next Thursday and short-dated rate spreads have turned a little more EUR/USD supportive.”
“Today's NFP will determine how far EUR/USD needs to rally. Undoubtedly there will be quite a few protective EUR/USD buy stops above 1.06 now for those running short positions. Yet, we suspect any corrective spike may fizzle in the 1.0630/0660 area and continue to see downside risks to our year-end target at 1.05.”
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